The future of wealth management

As we look at the world of wealth management in 2012, the old verities don’t seem to hold. Since late 2009, the stock market has been volatile to say the least and the magic of low interest rates and cash injection has not worked in quite the way it was supposed to.

The credit crunch in 2007 was a perfect storm. Every asset class – cash deposits, corporate bonds, gilts, equities and property – went down in value in the UK, US and Europe. More fortunate investors who invested in other countries, notably Brazil, India and China (known as the BRICs) were not affected in the same way, and these emerging economies still showed stock market growth up to the middle of 2010, though their inflation rates grew considerably.

Near-zero interest rates and quantitive easing (massive injections of cash into the markets) contributed to rapid growth in the stock market from late 2008 up until late 2009, but then the financial system had all but collapsed, and the measures governments took to stabilize it were truly gargantuan.

The stock market in the UK bounced back vigorously in 2009 and early 2010, though many commentators said this did not guarantee a basis for future improvement. The market is volatile, inflation is inexorably creeping up and long-term deflation in the world economy was predicted correctly. Who and what, do we believe?

Some investment analysts have been recommending gold, business angel investment and Venture capital Trusts as alternatives to conventional managed funds or direct investments in blue chip equities. Others react in horror, saying gold is widely overpriced and that the alternative investments are too risky in a volatile market. Their mantra seems to be: go for the tried and tested. But the tried and tested, for example investing in banks, did nobody any favours in recent past.

Luckily for those with money to invest, there are many options, including simple strategies such as investing in index trackers and exchange traded funds, which did not exist until recently. And increasingly people are turning to financial products that make money by making a positive difference in to the world.

One thing is certain; the wealth management world is even more complex and uncertain after the credit crunch, so expert advice from a specialist investment manager, in particular from one with a sound reputation and a good record over the last five years, is highly recommended.

Don’t be a gloom-monger! In these times of great uncertainly, bear in mind the following:

You may be preoccupied by the parlous state of your investments, but don’t expect everyone else to share your fixation.

Remember that, if you’ve got any sort of investment portfolio, you’re in a very lucky minority; so don’t moan about poor returns.

Haranguing other people about the non-productiveness of their investment won’t be popular: your advice may be good, but you should only offer it when you are invited to do so.

Accentuate the positive: don’t bellyache about economic uncertainties; use your money to make a difference in the world.